. are the top stories we are watching. approach and avoidance. the house and senate work to come together on tax reform. border, the fifth round of nafta negotiations. uber ross warns -- wilbur ross warns about a short fuse. robert e. lee bb-8 is detained, detained ingabe is zimbabwe after declaring "a coup is not a coup." ♪ >> the senate has a new version of its tax reform package. there are two important additions, doing away with the obamacare mandate requiring

people to get health insurance, and a phaseout of the tax cuts. sahilget the report from kapur, and josh green. josh is the author of "doubles bargain," -- "devils chronicling the rise of steve bannon. sahil, let's start with you. is the house coming closer together? certainly changes take the senate further apart from the house bill. you have a series of its deep cuts that- steep tax expire for december 31. to rate was cut from 35% 20%. this is going to be a political problem. the optics do not look good.

the obamacare individual mandate being repealed, how wide is it for them to bring back this issue? it makes obamacare -- mixes obamacare with tax reform. republicans decided this was necessary because they needed. $300 billion in budget saving. problemare has been a that has bedeviled republicans in congress, but also because if you look at the democratic route , this elections last week takes health care and injected into tax reform. david: this was a matter of saying, some of these tax cuts are not going to be permanent.

how much does that undercut their argument? sahil: it undercuts their argument that this is a thele-class tax cut, argument that speaker ryan and senator mcconnell are making. this is not conducive to their growth argument. saying the thing that matters to them is the corporate tax cut. politically, the mandate is a problem. it awakens a sleeping giant in the progressive base. they have not been as mobilized as the tax bill as they were on health care. they have started to oppose this tax bill in a way we haven't seen before. a risky strategy. shery: we have a new headline crossing the bloomberg terminal.

the house wanes and means committee chairman, -- ways and means committee says a deal has been reached to extend medicare payment policy. how does this fit into the tax reform package, especially when it comes to repealing the individual mandate of obamacare? josh: i have not seen what chairman -- sahil: i believe this is a separate issue. the ways and means committee is tasked with overseeing medicare. this affects reimbursement to doctors hospitals. josh, that narrow margin in the senate. ore running for session's seat, and now steve and it is backing away -- bannon is backing away. articles published suggest

that he has, but i don't do we know the answer. on his show, steve bannon is the only major republican figure who has not turned away from moore. it is not clear whether or not this scandal will cost republicans the senate seat and make tax reform that much more difficult. oore was always a wild card, even if he had gone to the senate. are you surprised that so many people are backing away? --il: sahil: -- really, given the nature of the allegations.

this would've been a reliable vote for tax reform. jazzeds more judged -- by social conservative issues. if the democrat can take that cpac, it becomes much harder for republicans to get that hospital across the finish line -. the issue about state and local taxes has been dividing the two houses. we talked to kevin brady yesterday, and then the republican from west virginia today, it wasn't like they are where she was. -- quite clear where she was. >> i am confident the senate knows the priorities of the house. i certainly do. keeping that tax connection is in concrete. that is a redline over which you will not cross.

>> it is. local tax state and issue is a problem for members of the house and senate. what you will see is a negotiation. if kevin brady puts a red line down, if he is that affirmative, strongly integral come out in the conference report. we are making our mark, which removes the state and local tax deduction. david: they need this in order to make the numbers work. sahil: they do. the senate bill makes a number of compromises designed to get the numbers down, which was revised last night. on are putting your finger the relationship between the house and senate. house republicans need the california and new jersey votes. house republicans are demanding this accommodation be made. senate republicans have zero

members representing new york, new jersey, illinois, and california. to house republicans want pass their bill this week, and that is why you hear chairman brady saying, they are going to stick by this promise. but how they make the numbers work is going to be one of many issues. david: thank you, sahil kapur an d josh green. shery: volatility seems to be back in the markets. let's get the latest market details from abigail doolittle. abigail: you are right about that. let us take a look at the major averages. all the indexes are lower for the second day in a row. the vix, nearing 13. the high on the year is 16. vextive to the year, the vixcreeping- the vix -- the

is creeping higher toward this your's high. let's pop back into the bloomberg. this is the russell 2000 in blue, and the russell 2000 vix in white. the blue, climbing higher to 16.5%. but down for percent from its record high, suggesting that investors are uncertain about tax reform -- but down four its record high, suggesting that investors are uncertain about tax reform. we have some outsize performers on the russell 2000. plunging on the unfortunate news there were deaths in the final stages of

the parkinson disease drug and treatment. maycom, down on a very weak quarter. sandridge energy, down 14%. less weakness for small-cap names. with the will talk chairman and ceo of the city national bank about the elimination of the state and local tax. live from new york, this is bloomberg. ♪

shery: this is "bloomberg markets: balance of power." david: let's check in on the

bloomberg first word news. mark crumpton has more. mark: the first director of the consumer financial protection bureau says he will be the position by the end of the month. he was appointed by president obama. his early resignation will give president trump the chance to appoint his own director of the agency that was established in the wake of the financial crisis. a major blackout has it for to we goes -- hit puerto rico's most populated region. this is about two months after hurricane maria. the blackout is affecting san juan and nearby cities and towns along the north coast of the island. power was restored there in recent weeks. secretary of state rex tillerson called for and independent investigation into the country's humanitarian crisis, which has seen hundreds of thousands of r

to bangladesh. >> we are deeply concerned by chronicle reports -- credible reports of a vigilantes who are under restraint by security forces. mark: secretary tillerson said the united states would consider individual sanctions against the people found responsible for the violence. he said he would not advised "broad-based economic sanctions" against the entire country. the long anticipated border crossing with egypt has been postponed. an advisor to palestinian authorities said egypt cited "special circumstances for delaying the crossings opening."

from seized the territory 2007. authority in global news 24 hours a day, powered by more than 2,700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. tomorrow, the house is expected to vote on its tax plan that would eliminate the deductibility of all state income and sales taxes. how will homeowners be affected? let's ask russell goldsmith, the chairman and ceo of the city national bank. we will get particular insight into how the changes could impact his clients. he joins us from los angeles. thank you so much for joining us. some people say that eliminating the self deductions could make governments more efficient, what you think the tax plan is unfair. why?

russell: it is not going to make government more efficient, it is not going to reduce taxes or revenue. in places like california, new york, illinois, or new jersey. there is a tremendous set of social services with locked-in tensions. all this is going to do -- millions of americans in our most productive economic regions are going to see an increase of 30%-40% in their cost of state and local taxes. it hits people in a limited number of states. it is unfair and violates the fundamental compact that was put in place when the internal revenue code was created in 1913. $6,000eally want to put

increases in taxes on millions of americans in our most successful states, for the most part, like california and new york? it is unfair and it won't reduce government. it will make government much more expensive for millions of working class, middle class, and other taxpayers. david: well taken. there may be unfairness. on the question of reducing government, those people paying more money are voters, as well as taxpayers. might that's not cause them to cause their state governments to spend less? $100,000, spending rather than $60,000? russell: there is a very indirect. , and like a lot of things with this tax bill, it is rushed forward, without a real understanding of the ramifications.

this is a once in a generation opportunity. we need tax reform, but we don't need to rush it through. with thempering central nervous system of the american economy and we need to get it right. in 1986, the last time this was done, there was a way the process, bipartisan -- lengthy resolution,artisan expert testimony and public hearings. ings thing is bring -- be without a clear understanding -- being rushed through overnight without a clear understanding from the american people. gdp is around 3% in the last quarter. down, make sure everyone understands all the pieces of this complex puzzle. let's do it like president reagan, and really understand this before we do it.

they want to throw health care, 1/6 of the u.s. economy. we should be tampering with the nervous system, -- shouldn't be tampering with the nervous system, tax code, and health care, without a single public hearing. salt deductions getting repealed and the obamacare individual mandate getting repealed, they are all part of trying to raise revenue. if you have the chance to tweak these tax bills from the house and senate, where would you try to squeeze more money? russell: they are trying to raise money. meanwhile, they have agreed to $1.5 trillion to the deficit. trillion 2012 -- $20

deficit, and that is going to keep rising. they want to throw another $1.5 trillion. that is billions of dollars each year in interest rates on this money. the economy is doing reasonably well. we don't need a massive stimulus of a 4% unemployment. of ae in the early stages rising interest rate environment. if the interest rate on the u.s. debt goes up 100 basis points, which seems likely, given what the fed is doing -- that is $200 billion a year the federal government is going to be paying out in the not-too-distant future. extrather 50 for this $1.5 trillion -- add another 50 for this extra $1.5 trillion.

we have to look at the bounce -- balance, which is why i argue we slow down and not have a tax on middle-class, working-class americans in places like california and new york. contrary to popular myth, we are subsidizing the rest of america. shery: thank you so much for joining us. goldsmith, the chairman and ceo of city national bank. david: troops are on the streets as the military takes control in an apparent to him zimbabwe -- coup in zimbabwe. live from new york, this is bloomberg. ♪ ♪

zimbabwe asval in the military takes control. robert mugabe is under house arrest, following weeks of political infighting.

bitcoin climbed as much as 10% in the country. let's bring in our the ball boy zimbabwent -- our government reporter. the military denies this is a coup. what is it? coup in all but name. no timeframe has been given. we don't know what happens next. david: how are the markets reacting? i am going to put up a chart of the zimbabwe stock exchange. equity,eally want rather than money. brian: correct. useerms of hard cash, we u.s. dollars in the ball boy --

zimbabwe. money whereutting ever you can, where can put money. shery: explained to us the catalyst for the latest crisis. brian: the firing of the vice president last week. he had strong support in the military. he was fired on the insistence of mugabe's wife. that deeply upset the military. this was the end result, they staged this coup they call, "not a coup." david: what we know about the statusdavid: of robert mugabe?

brian: the south african president spoke to him in his home today. he was safe. "fine."ibed himself as david: thank you very much. shery: coming up, failure is not an option. that is what to be u.s. chamber of commerce -- what the u.s. chamber of commerce told lawmakers about tax reform. caroline harris, we will talk with her about the ongoing bind on capitol hill. this is bloomberg. ♪

shery: welcome back. this is "bloomberg markets balance of power." mark: the senate finance

committee chairman is defending the decision to include in the gop tax bill to repeal of the obamacare requirement for americans to get health insurance. chairman hatch said the requirement that nearly everyone have insurance or pay a fine is in fact a tax. >> the relevant statute is the internal revenue code. the mandate is enforced by the internal revenue service. we are all familiar with the old saying, if it looks like a duck and swims like a duck and quacks like a duck, it's probably a duck. >> let's not kid around. this is not just another garden-variety attack on the affordable care act. this is repeal of that law. mark: repealing the mandate would raise $338 billion that could help paper deep tax cuts, especially for corporations. that -- would take

millions of americans often turns roles. statehouse democrats have introduced articles of impeachment against president trump. efforts being led by steve cohen who says he thinks the majority of democrats agree that he's made impeachable offenses. russian hackers are targeting the country's telecommunications systems, media and energy networks. theresa may said russia was weaponize and information and meddling in elections to undermine the international order. flash floods on the outskirts of athens have killed at least 14 people. the flooding came after severe overnight storms brought driving

range the greek capital. rivers.ds turned into global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. shery: thank you/ tug-of-war on capitol hill between competing tax plans. the senate finance committee announced yesterday the plan would include a repeal of the obamacare individual mandate. this provision frees up $300 billion according to the congressional budget office. but inserts another layer of political hurdle. u.s. chamber of commerce has warned lawmakers that failure is not an option. we are joined by the vice president of tax policy, caroline harris. great to have you with us. they just injected health care into the tax debate. would you say this helps or

hurts the chances of final passage of this bill? caroline: i think that the chamber has always been focused on what the concourse of progrowth tax policy look like. you saw a house bill that didn't have the individual mandate. likewise on the initial senate bill. if it gives them the ability to provide more tax relief, i'm not surprised it's part of the conversation. david: you've been consistent at the chamber saying this is about growth. does that make you disappointed in the fact that they are talking about walking back on some of the tax cuts? caroline: we have revenue parameters to work within and we are impressed with the house and senate and administration continuing to work to make this as progrowth as possible.

we're looking at the reduced permanent tax rate for pastors and see corporations. we're looking at full expensing. pass-throughs and c corporations. shery: capital investment can actually be fully written off immediately, balancing itself with a delayed corporate rate tax cut. caroline: we obviously understand the revenue confines g. was thet be permanent best choice they can make an combine with that expensing and that territorial system, looks more like our global competitors in both the house and senate bill. david: how much growth comes from capital investment and increase productivity?

is there a sense that the chamber is happy? --y have 35% tax rate that instead of getting a 20% break. is there a sense that this will encourage capital investment? caroline: i will differ to our professional scorekeepers. -- capitalended in expensing has a tremendous impact on growth. we've always talked about transition roles. to the extent there are transition roles, we understand we -- we are happy to see the rate reduction. shery: why do you need such big corporate tax cuts? when you consider the deductions and loopholes in the current tax system, businesses get a rate of close to 20% anyways. ive rate: the effect is around 23%, but not every company is the benefit of that.

some are close to that marginal rate. highn the corporate side, on the individual side is not globally competitive. if we want companies to stay here and drive direct investment here, we have to overhaul our tax code and creepy level playing field. -- create a level playing field. david: what is a sensible way to protect -- we will give you a break from 35% to 20%. that is more cash in your pocket. we would like for you to invest in equipment and expansion. how do you make sure it gets invested in the united states of america? caroline: that is a choice for companies to make. any money that is invested in this country whether it be property and equipment or stock buybacks is positive. that is their choice. we want folks to have a text for that welcomes this capital here.

the senate bill seems to have received a warmer welcome from the small business community. which one do you prefer at this point? caroline: both of them are strong. we saw a nonpartisan scorekeeper come out with a 4% impact on gdp growth for both. they go about it in slightly different ways. the big pieces are similar. we will see them work through those differences. wants the chamber simplicity and clarity in the tax code. the pass-through treatment, i cannot figure it out. do you believe this will be a similar tax code? caroline: i believe we will have a transition period. you and i have talked about this a lot. how do we get from here to there. i truly do believe we are moving

to a place that is simpler for the majority of americans . shery: caroline harris, thank you. the fifthing up, round of nafta negotiations kicking off in mexico city today, but without any of the assistance.p trade this is bloomberg. ♪

shery: welcome back. david: yesterday, we heard from wilbur ross that it would be "enormously complex" to get a

new nafta deal done by march but it was "on a very short time fuse." the fifth round of talks will not include the trade ministers responsible for getting the job done. of this posturing coming with tough negotiation or are there deeper problems with the trade negotiations going on? we welcome our bloomberg nafta and mikeeric martin mckee. know about why the trade ministers are not showing up? : what we have been told is that they met this past week in vietnam on the sidelines of the aipac meeting. they felt another meeting this soon after would be unnecessary. the subtext here is that it appears the three sides are trying to lower some of the belligerence and political rhetoric and get back to what

trade negotiations normally are, which are very technical and very prodding come up of a marathon than a sprint. it wasn't necessary to be giving these messages to the media and the public as they have been at the end of the last several rounds. shery: tell us a little bit about how matters could become located next year politically given that we have presidential election in mexico and the congressional midterms in the u.s. michael: the u.s. is negotiating under fast-track trade authority. 1, which is on july quinn stanley the date of the mexican election that coincidentally the date of the mexican election. -- which is coincidentally the date of the mexican election. they need to make progress on the 30 chapters in the nafta treaty. this gives them time to do it under the radar and make some progress on things.

the trump administration would like knono negative headlines about other subjects, . the congress is out next week. they would like to keep taxes in the news and not have headlines about u.s.-mexico-canada squaring off. david: we just kicking the can down the road. what does it mean for your election in mexico if there is not a new nafta deal? certainly this complicates the political timing of this. once we found out the negotiations were going to last until potentially march, that began to mix the scenario with the beginnings of the campaign here with the election in the beginning of july. in campaigns begin earnest in january and february.

at the same time, it offers an opportunity for debate within mexico about the benefits and costs of nafta over the past 20 years. it does mix factors that negotiators wanted to keep separate. this.was no avoiding shery: there are so many things that still needs to be discussed. what parts of this agreement are more advanced when it comes to progress and what other parts still remain really far away from any compromise? michael: right now, they have closed a couple of chapters on trade that happened in the previous treaty would just updating things that needed to be updated. this round, we are told they will focus on some new items, internet commerce -- we didn't

have that 25 years ago. everybody agrees on the parameters of that. it is settling the details. they want the negotiators to work on things like that. the killer demands from the u.s. that they get rid of the dispute resolution mechanisms, those are for another day. those are really difficult. the canadiens and to ken's have said we won't even talk about those unless the u.s. comes back with a softer position. canadians and mexicans have said we won't even talk about those unless the u.s. comes back with a softer position. david: the ceos are following this. what about in mexico city? the regular person walking on the sri-kumar they aware of these negotiations? eirc: not the average person on the street. when you talk to professionals,

people in the legal or business communities, this is the top issue. with the election next year, they are focused on the leftist candidate who's talked about redoing parts of the energy .eform this candidate is leading in some of the early polls. that and nafta are the big issues that they are in discussion politically here and there but he has their eye on. david: eric martin and michael mckee, thank you for being with us. shery: time for our stock of the hour. quorum health care is the worst performing hospital stock on the day. shares are down 10% over the last two days. let's bring in abigail doolittle. does this have anything to do with tax reform and the talk of obamacare individual mandate repeal?

abigail: if the repeal is put in once, it could really drag quorum health, hospitals receive 20% of their earnings from obamacare. there is some fear of that. there's a second reason, too. if we hop into the bloomberg and take a look at an intraday chart of the hospital stocks,.we will see this in white, we have quorum health. other names like tenet health, community health, they are also down because of those fears that the tax reform bill could include the possibility of that repeal of the individual mandate. all of these companies are highly leveraged, but quorum the most. we look at the debt levels, here's quorum health. highly leveraged. behind it, community health and tenet healthcare .

we have the high-yield selloff more recently. these are considered to be companies that have high-yield debt. overall around these companies. david: the health thing has been up and down and all around. is this more reaction that we've seen before? abigail: i was speaking to jason mcgorman. this seems so outside. repeal and replace didn't work, obviously. sure lots of the experts you've been talking to, they've been saying this would complicate it. investors are taking it pretty seriously. this is the bloomberg hospital index on the year. at one point, of more than 30%. around the time that repeal and replace seemed somewhat serious

-- then higher by 10%. now, the hospitals are down 11% on the year. another week earnings period. pretty remarkable. some investors seem to be somewhat nervous. shery: coming up, global leaders gather today to talk about how to implement the paris climate agreement. we will dig into the investments in clean energy, next. this is bloomberg. ♪

david: this is "bloomberg markets balance of power." shery: global leaders descended on germany today to talk about climate change, honing in on implementing the paris climate agreement and highlighting clean energy. joining us now to discuss from washington is ethan.

give us the just of this meeting. what are they trying to achieve? >> we are two years past the paris climate agreement, which pledged 200 countries to do something about climate change. everyone made up their own promise. there's talk about how to monitor and make sure each country follows through. the money much of that was pledged was public and how much private? from 2015 to 2016, there's a big drop off. >> the total amount of actual capital flowing from -- into developing countries in support of clean energy has dropped year on year. maybe more importantly for the sake of the climate talks is what percentage of that money has come from wealthy countries towards less-developed countries. that amount is much smaller.

that's about $10 million last year. the relevance to that is that back at the copenhagen negotiation eight years ago the wealthy countries that we will provide you with $100 million a year to deal with all kinds of fx of climate change and we are only tracking $10 million. said: given what you've and the fact that power demands , how as this chart shows big of a problem can this be going forward? what can developing nations do in order to attract more investment? >> from a purely practical standpoint, if you look at the different models, if we are going to keep the temperature rise in somewhat reasonable check, all new energy that gets

added on the power site in developing countries should be zero carbon. there's a lot of work that needs to be done. you cannot build much more coal at all if you want to comply with the new models we've seen. david: there's been a lot of coverage of the fact that president trump pulled the united states out of this agreement. how much of this drop off in investment is because of the u.s. alone? >> clifton none of this has anything to do with the united states. there's all kinds of other issues. china is the largest market for clean energy. it's all a sharp drop of $30 billion last year. we think that will rebound this year. there were specific issues it's noto this -- sending a positive signal to the rest of the world. the decisions that are being made about building new wind and solar, it's on the ground in

these countries and being determined by local factors. shery: what is the u.s. role here as we get the talks this week? >> it's a very interesting situation. the president announced the u.s. wants to get out of the agreement. the rules of the agreement mean the u.s. cannot officially exits until the end of his term. you have an awkward situation where you have a delegation from the u.s. there involved in the conversations while the president has already set we want nothing to do with this deal. david: thank you for joining us today. shery: you can sign-up up for the balance of power newsletter at bloombergpolitics.com. get the latest on global politics and watch more in your inbox every day. coming up, senator james lankford joins to discuss the

latest on tax reform and today's nafta talks. don't miss that interview at 3:00 p.m. eastern. david: you can catch all of our interviews on the bloomberg with tv . you can also find breaking news and charts and related functionalities. this is bloomberg. ♪

scarlet: it is 2:00 p.m. in new york and 7:00 p.m. in london. scarlet: welcome to -- julia: welcome to "bloomberg markets."

scarlet: we are live in new york over the next hour. a big bet on deutsche bank. in new top investor in germany's number one lender. a bloomberg exclusive with think of canada. its senior deputy governor joins us to discuss monetary policy and much more. amazon takes ai to a new level . we will give you the inside scoop. we have breaking news. the president will be making a statement at 3:00 p.m. new york time. no word on the topic. we will give you a glimpse of his comments when they begin. we are tracking markets. right now, we have two hours to go before the close. abigail doolittle is here with this risk off feel.